Qantas gang means business

It is a common joke within the aviation industry that you would have to be mad to invest in an airline.

Richard Branson and Warren Buffett like to quote the famous line, “to become a millionaire is simple; start as a billionaire and buy an airline".

The would-be owners keep circling, however, despite the likelihood they will lose money on an industry which is capital-intensive, incredibly volatile and has high fixed costs.

Venture capitalist
Mark Carnegie
, former
Qantas Airways
chief
Geoff Dixon
, ad-man
John Singleton
, and other powerful mates have joined the long list of high-profile businessmen who have been unable to resist the smell of avgas.

There has been plenty of doubt about how serious they really were in investing in Qantas although talks with shareholders and unions have been going for some time.

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However, news that they actually own a 1 to 2 per cent stake in the airline shows the consortium is willing to put its money where its mouth is.

This does not mean Carnegie and friends are going to make a takeover bid or are anywhere close to winning strategic control. But it will make the doubters sit up and take notice.

At this stage it is hard to see what their end game is.

If chief executive officer
Alan Joyce
’s strategy works, there is plenty of upside in the share price and they could make a tidy profit on their current investment.

The irony there is that the Carnegie consortium thinks Joyce has the airline on the wrong course.

The other scenario is that they can muster up enough support from existing shareholders to give them control and implement an alternative strategy.

A full takeover bid seems unlikely. Unlike Buffett and Branson, the group of millionaires are nowhere near becoming billionaires. They would need some powerful backers. They have also lost the element of surprise, which is the more usual tactic used in hostile takeover bids.

Still, the Carnegie consortium should know what it is doing given some members’ involvement in the last takeover bid for Qantas in 2007.

Their presence on the share register, no matter how small, is another distraction Joyce does not need.